The Morning Risk Report: U.K. AML Changes Spark Skepticism, Hope

The launch of a new U.K. anti-money laundering agency, and a draft set of new rules, set off a debate on how, and whether the changes will work. Activists, lawyers and experts all discussed the effects of the changes.

The introduction of the new office "must be cautiously welcomed," said Matthew Banham, a London-bsed senior associate at the law firm Dechert. The new watchdog and the rules, should they be finalized in current form, would bring "consistency...and provide much-needed certainty" to businesses that operate amid a "web" of anti-money-laundering regulations, he said. As such, Claire Cross, an attorney at the firm Corker Binning, said the question of "who guards the guards" has been answered by the introduction of the new office. "It is clear that [Financial Conduct Authority] supervision teams and [the new office] will need to work closely to ensure that advice and guidance provided to the industry is coordinated, and to guarantee that cracks, which has been a key government concern, do not emerge." Pekka Dare, director of training education and development at International Compliance Training Ltd., said that front-line relationship managers will need more training and will own their decisions. "The guys on the first line will have to make a lot more judgement calls" on who constitutes a money-laundering risk, he said.

Meanwhile, anti-graft activist groups were more circumspect. Robert Barrington, executive director of Transparency International UK, said in a statement that the proposals are "novel and untested," and said "while we hope they succeed, what we can say right now is that the new watchdog will certainly fail if it is toothless." Murray Worthy, a senior campaigner on banks and corruption at Global Witness, said that while there are some steps forward in the draft rules on regulating trusts and company service providers, there isn't enough on accountability for senior executives. "There is space for more work to be done there," he said.

China to require KYC for bitcoin. China’s central bank is moving to regulate its domestic bitcoin industry, circulating new guidelines that, if enacted, would require exchanges to identify clients and adhere to banking regulations, the WSJ reports. Recent scrutiny by the central bank has already led exchanges to impose trading fees and suspend withdrawals of bitcoin from their platforms. Chinese investors have fled the market. A draft of the guidelines says Chinese bitcoin exchanges would be subject to current banking and anti-money-laundering laws, and required to collect information to verify the identity of their clients, according to people familiar with the matter. They say the rules, if implemented, would require exchanges to install systems for collecting and reporting suspicious trading activity to authorities. The People’s Bank of China would be in charge of handling violations by the exchanges.

Bloomberg

Brazil suspends lawsuit vs. mining cos. A Brazilian judge suspended a nearly $50 billion lawsuit against mining firms responsible for the 2015 Samarco disaster Thursday, as negotiations between the companies and authorities moved forward, the WSJ reports. The decision came as part of a ruling in which federal judge Mário de Paula Franco Júnior approved a road map toward a final agreement between prosecutors and mining companies Vale, BHP Billiton and their joint-venture Samarco Mineração SA.

NY cuts off another brokerage firm. A New York state pension plan said it cut ties last week with Amherst Pierpont Securities, a brokerage that won nearly $2 billion in annual bond-trading business during the tenure of a portfolio manager now facing federal bribery charges, the WSJ reports. The New York State Common Retirement Fund took the step, according to people familiar with the matter, because of concerns about a connection between a former Amherst salesman, Joseph Daher, and Navnoor Kang, the $186 billion retirement system’s former manager who was indicted last December. Mr. Kang pleaded not guilty to the charges in federal district court in Manhattan. The state pension fund said it is reviewing his actions.

Exxonresponds to disclosure claim. Exxon Mobil Corp. called accusations that it withheld documents relating to climate change from the New York attorney general an attempt to discredit the energy company, but disclosed a newly discovered technical issue that could mean it will soon release more of its former chairman’s emails, the WSJ reports. Attorney General Eric Schneiderman’s office has been investigating whether Exxon misrepresented its understanding of climate change to investors and the public. Earlier this week, lawyers for Mr. Schneiderman’s office said in court documents that Exxon had not disclosed that Rex Tillerson, Exxon’s former chief executive, had used an alias email—wayne.tracker@exxonmobil.com—to discuss the issue. Exxon rebutted that claim in a letter to the court on Thursday, saying that the accusations were about “obtaining publicity, not information.”

Secretary of State and former Exxon Mobil Corp. Chairman Rex Tillerson.

European Pressphoto Agency

Caterpillarhires former AG for probe. Officials at Caterpillar Inc., which has faced scrutiny from federal investigators, said Thursday it has hired former U.S. Attorney General William Barr to help assess matters related to government raids on its facilities earlier this month, the WSJ reports. Mr. Barr, who served under former President George H.W. Bush between 1991 and 1993, will also assist the embattled heavy-machinery giant in addressing the intensifying federal probe.

Tillerson suggests more North Korea sanctions. U.S. Secretary of State Rex Tillerson said Friday the time isn’t ripe for negotiations with North Korea, adding that there is more room for sanctions against Pyongyang as it moves closer to being able to mount a nuclear warhead on a long-range ballistic missile, the WSJ reports. Mr. Tillerson, speaking to reporters in Seoul before a meeting with South Korean Foreign Minister Yun Byung-se, said that he would raise concerns with Chinese President Xi Jinping regarding Beijing’s perceived retaliation against South Korea for deploying a U.S. missile-defense system aimed at defending against the North’s threats.

Brazil charges to include corruption, money laundering. Details of a request to prosecute scores of top politicians in Brazil will likely take days to be released, but they will include accusations of corruption and money laundering, a person familiar with the matter tld the WSJ Thursday. Earlier in the week, Attorney General Rodrigo Janot’s office handed 83 requests to the Supreme Court to probe politicians who, under Brazilian law, can only be investigated with special permission. Justice Edson Fachin will decide if the prosecutors may proceed and whether the names can be made public.

DATA SECURITY

Yahoohacker has eluded capture. U.S. authorities said Russian intelligence officers backed the massive 2014 hack against Yahoo Inc., but the hacker at the center of the allegations is a 29-year-old who has eluded Western law-enforcement agencies for several years, the WSJ reports. Alexsey Belan, a Latvian-born Russian national, has been named in two prior U.S. federal indictments for crimes dating back to 2012. Contents of those charges haven’t been disclosed until this week, but one of the cases involved the 2013 hacking of document-sharing website Scribd Inc., according to the indictment unsealed this week.

An FBI issued photo of Alexsey Belan, who is at the center of the U.S. probe related to the massive hack against Yahoo.

Charter CEO gets large pay boost. Charter Communications Chief Executive Thomas Rutledge is joining the ranks of the highest-paid media executives after closing the acquisition of Time Warner Cable, the WSJ reports. Mr. Rutledge received a 500% increase in total compensation last year, thanks to a big grant of stock options that boosted his total pay to $98.5 million, according to a regulatory filing.

Honest replaces CEO. Honest Co., the consumer-products business co-founded by actress Jessica Alba, is replacing its chief executive after the money-losing startup failed to sell itself to a bigger player, the WSJ reports. Clorox Co.executive Nick Vlahos will replace Brian Lee, a tech entrepreneur who co-founded the company with Ms. Alba in 2011, the company said Thursday. Mr. Lee will remain on the Honest board and serve as an adviser to the company.

RISK

Swift cuts off North Korean banks. Four North Korean banks that were still able to use the Swift money-transfer messaging system despite U.S. Treasury sanctions will be deactivated from the network in coming days, leaving none of the country’s banks with access. Swift spokeswoman Natasha de Teran told the WSJ in a statement Thursday that the four North Korean banks “will no longer have access to the Swift” service. She said that, “given the increased ongoing international attention” on Pyongyang, Brussels-based Swift had informed Belgian and European authorities of its decision to cut them off.